Tag Archives: TCPA

Another Significant Supreme Court Ruling

The Supreme Court came down with another decision last week that is going to further hobble administrative agencies like the FCC. The case is McLaughlin Chiropractic Associates, Inc. v. McKesson Corp., No. 23-1226.

This case started in 2013 as a class action lawsuit filed in federal court in the Northern District of California. The dispute between the parties began when McKesson Corporation sent unsolicited advertisements by fax to class members of the suit, including McLaughlin Chiropractic. The advertisements were sent to traditional fax machines as well as to online fax services.

The plaintiffs claimed that the unsolicited faxes were in violation of the Telephone Consumer Protection Act (TCPA) which forbids unsolicited communications with consumers without giving them a chance to opt out of the communications. The alleged damages come from recipients spending money on paper and toner to print the unsolicited faxes, which the TCPA refers to as advertiser cost-shifting.

While the case was pending in California courts for six years, the FCC issued an order that excluded online fax services from the TCPA since online faxes receive electronic files and don’t print hard copies of a received fax.

The McLaughlin case made it to the Supreme Court because the District Court found that it was required to follow the new FCC order, even though it disagreed with the FCC’s interpretation of the TCPA. The District Court also felt constrained by 1950 legislation referred to as the Hobbs Act, which has been interpreted as barring district courts from disagreeing with a federal agency’s interpretation of a statute.

The recent Supreme Court ruling sided with the District Court by a 6-3 vote. The Supreme Court ruled that “The Hobbs Act does not preclude district courts from independently assessing whether an agency’s interpretation of the relevant statute is correct.”

This is a significant ruling because it gives more explicit power to District Courts to disagree with an administrative ruling of a federal agency. It’s likely that there is a District Court somewhere in the country that will disagree with almost any federal agency ruling, meaning that it will be that much easier to tie up every decision made by the FCC or other federal agency in court.

When you tack this ruling onto the Supreme Court’s ruling last year in Loper Bright Enterprises v. Raimondo, it’s going to be increasingly difficult for federal agencies to issue decision that will stick. The Loper Bright ruling overturned a long-standing deferential approach to agencies’ interpretations of statutes, making it easier to sue them.

This new ruling also has practical implications since it explicitly weakens FCC enforcement of the TCPA. Among other things, the TCPA rules are the FCC’s primary tool for its effort to restrain the use of autodialers and artificial voices used in spam messages to consumers.

FCC Investigating AI Robocalls

At the November 2023 FCC monthly meeting, the FCC approved the release of Notice of Inquiry related to the impact of AI-generated calls. The press referred to this effort as an attempt to stop AI-generated nuisance robocalls, but the investigation covers a lot of other issues.

The FCC is currently bound by the Telephone Consumer Protection Act (TCPA) that Congress passed in 1991 that prohibited “any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party” unless a statutory exception applies or the call is exempted by ruling or order from the FCC. Subsequent to that order, the FCC determined that the rule applies to both calls and texts.

When that law was passed, the majority of the complaints received at the FCC were from consumers complaining about junk calls. The volume of junk calls is greater today than in 1991, but most people have learned how to deal with or ignore such calls.

Unfortunately, the FCC can’t just decide that all calls involving computer-generated voices are illegal. One of the big promises of AI is that customer service departments will be able to use AI to provide better customer service. On an inbound basis, AI can be used to eliminate the  dreaded “If you are calling for X, press 1… for Y, press 2”. AI can instead direct a call to the right person by listening to what customers are seeking.

More troublesome for the FCC is that AI can also be used to send calls or texts to customers to answer specific customer questions. There are businesses that have already converted inbound customer service to AI, and it’s inevitable that AI will be used for outbound calls and sales.

One of the challenges faced by the FCC and all government agencies is how to define AI to distinguish it from uses of technology that are not AI. The National Artificial Intelligence Initiative Act of 2020 defined AI as “a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions.” The National Institute of Standards and Technology (NIST) defined AI as “the capability of a device to perform functions that are normally associated with human intelligence, such as reasoning, learning, and self-improvement.” Those definitions are talking about AI that is a lot more advanced than what is needed to place calls to people.

When Congress enacted the TCPA, it concluded that artificial and prerecorded voice messages constituted a greater nuisance to consumers than calls with live persons. The FCC is left with the unenviable task of deciding if AI calls are a nuisance if the AI call can interface with people in the same manner as a live person by responding to questions. How will people even know they are talking to an AI-generated voice?

One of the particularly troubling aspects of AI is that the technology is going to be able to generate a voice that is tailored to each called party. The AI caller can mimic the accent, slang, and other language characteristics that will make it feel comfortable to callers. AI could even creepily mimic somebody a person knows, gaining instant credibility. AI seems like a particularly powerful tool in the hands of scammers.

I think one thing is almost guaranteed – AI scammers will quickly find a way around any specific rules formulated by the FCC. AI can be used to develop calling strategies that sidestep specific regulations. It’s going to be interesting to see what the FCC develops. The first generation rules are almost sure to be inadequate, and this is a topic that is going to have to be continually revisited to keep up with changing technology and determined hackers.

The FCC to Tackle Lead Generation

In its ongoing battle to eliminate junk calls and texts, the FCC is considering new rules that would close down the practice of lead generation that tries to bypass Do Not Call restrictions. Current industry practices have found loopholes to avoid violating the letter of the FCC rules.

Lead generation is the source of a lot of spam and robocalls. A consumer will go to a website, such as an insurance company, and in order to get a free quote, the consumer will agree that the insurance company can share information for purposes of marketing with its ‘partners’. The partner companies, which likely paid the insurance company for the sales leads, can then claim that they have permission from the consumer to call or text them, thus avoiding the FCC’s Do Not Call restrictions.

In real-life practice, companies are not only sharing information with closely allied companies, but with any company willing to buy the referral. The sharing of lead generation materials has grown to become big business, and, in one example cited by the FCC, a  company was sharing customer calling information with 5,000 ‘marketing partners.’

The FCC’s proposed rules are aimed at strengthening the rules established by the Telephone Consumer Protection Act (TCPA). The law was originally enacted by Congress in 1991 as the first step towards taming the growing number of unwanted calls to consumers. The Act limited the use of pre-recorded voice messages, auto-dialers, and automated texts. The Act said that anybody calling a consumer must have explicit customer consent. The Act also created the national Do Not Call Registry for people to declare they don’t want unsolicited calls.

The FCC plans to solicit comments on its proposal to tighten the rules. The FCC is considering only allowing lead generating referrals with partners that are logically and topically associated with the website. The FCC also wants any company that will make referrals to prominently display the identity of all marketing partners on the web page where consent is being requested.

The new FCC rules would create a huge shift for companies that use such referrals to bypass the Do Not Call rules. Many businesses that primarily sell by telephone or text calls say that enforcing the new rules would put them out of business. The practice of obtaining referrals through other companies is also widely used in the non-profit world.

It’s taken the FCC far too long to do this, and marketing referrals have been widely used for years to ignore the Do Not Call rules. I’ve been on the Do Not Call list for over twenty years, and I still receive a lot of junk calls and junk texts.

Twenty-eight State Attorney Generals have asked the FCC to tighten these rules. This issue is also being considered by the Federal Trade Commission related to its Dot Com Disclosure rules. There are also several lawsuits in federal courts taking on companies that violate the TCPA rules.